Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Pres Foreign Opps 3001
32 slides from Virtus Investment Partners's investor presentation, Jun 30, 2015
Slide 1: Virtus Foreign Opportunities Fund
VIRTUS FOREIGN OPPORTUNITIES FUND June 30, 2015
Slide 2: Table of Contents
TABLE OF CONTENTS I. Organizational Overview II. Subadviser Overview III. Investment Philosophy, Objective, and Process IV. Portfolio Construction V. Performance and Characteristics VI. Summary VII. Notes 2
Slide 3: Virtus Investment Partners
VIRTUS INVESTMENT PARTNERS Virtus is an independent publicly traded asset management company (NASDAQ: VRTS) Disciplined, institutional-quality money management through wholly owned subsidiaries and select subadvisers, each with a distinct investment philosophy and style Investment products inc
Slide 4: Virtus Organizational Overview
VIRTUS ORGANIZATIONAL OVERVIEW Virtus offers an array of * * distinctive capabilities from our investment * * partners. * * * * * * *Virtus Investment Partners retains an ownership interest in the firm. 4
Slide 5: Vontobel Asset Management, Inc.
VONTOBEL ASSET MANAGEMENT, INC. New York based SEC registered investment adviser, established in 1984 Subadvising four investment strategies for Virtus $50.7 billion under management as of 6/30/15 Recognized leader in global investing 5
Slide 6: Vontobel Asset Management, Inc.
VONTOBEL ASSET MANAGEMENT, INC. Rajiv Jain Lead Manager since September 1997 Chief Investment Officer Previously with Swiss Bank Corp. (now UBS) Co-Chief Executive Officer 26 Years1 Matthew Benkendorf Peter Newell Portfolio Manager/ Senior Portfolio Adviser Sr. Research Analyst 31 Years1 18 Year
Slide 7: Investment Approach
INVESTMENT APPROACH We believe consistent S&P 500® Sector Annual Rates of Growth and sustainable From 1995 to 2014 earnings growth E 11.1% drives consistent 10.9% 10.2% 10.1% returns and leads to S 9.3% 9.2% 9.1% outperformance Stock Price Earnings 8.4% 8.2% 7.8% 7.1% 7.0% 6.7% 6.5% 6.2% 5.9% 5.7% 4
Slide 8: Investment Philosophy
INVESTMENT PHILOSOPHY We believe that the best way to achieve capital appreciation and outperform the market over time is by: investing in high quality businesses with proven records of operating profitability and favorable long-term economic prospects at attractive valuations There is no as
Slide 9: Performance Objectives
PERFORMANCE OBJECTIVES To outperform the benchmark index over a full market cycle with lower-than-market volatility To generate investment results as consistent and predictable as the earnings of the underlying companies There is no assurance that the investment objective will be achieved or mai
Slide 10: Investment Principles
INVESTMENT PRINCIPLES Concentrate on business analysis (bottom-up approach) High quality growth at sensible prices High-conviction portfolio Benchmark unconstrained Long-term focus 10
Slide 11: Investment Process Overview
INVESTMENT PROCESS OVERVIEW SCREEN AND ANALYZE ANALYZE FUTURE PORTFOLIO PRICE IDEA GENERATION PAST RESULTS OPPORTUNITIES CONSTRUCTION ~22,000 ~300 (investment universe) ~50-70 positions Pass high hurdle rates Understand the business and Replicate and exceed past Sensible price Benchmark unconstraine
Slide 12: Investment Approach
INVESTMENT APPROACH Analyze Past Results: Quality of Earnings, Consistency, and Predictability XYZ* High Quality Growth = Ability to earn high ROE on a growing equity base with low-to-moderate leverage Operating Income Growth Rates CFO CAPEX Per Share Tax Rate EPS DPS Debt / Equity OPM ROE 10 yrs 17
Slide 13: Valuation
VALUATION Assumptions EPS growth Terminal multiple estimate 8% p.a. 15x. (10.5x-18.6x Discount rate 6% Discount ~30% (vs. 12% p.a. for historical range; past 5 years) 15.1x currently) Vontobel EPS estimate Terminal multiple on year 5 Vontobel Current earnings estimate Fundamental Price Business valu
Slide 14: Sell Discipline
SELL DISCIPLINE Better alternative identified Price target met Deterioration in fundamentals Major merger/acquisition-related activity Portfolio considerations 14
Slide 15: Portfolio Construction and Risk Management
PORTFOLIO CONSTRUCTION AND RISK MANAGEMENT Risk Management Cash Fully invested We believe the main Maximum position size at purchase: 7% sources of risk are stock Position Size Number of stocks: 50–70 specific, i.e. Did we get the company Sector At least 5 sectors at all times fundamentals
Slide 16: Valuation and Statistics as of 6/30/15
VALUATION AND STATISTICS AS OF 6/30/15 Virtus Foreign MSCI EAFE® Opportunities Fund Index Weighted Average Market Cap ($bn) $63.78 $50.78 Median Market Cap ($bn) $30.96 $6.48 P/E – Forecast 12-month (weighted harmonic average) 22.94x 17.00x 3 Year Historical EPS Growth 14.58 7.02 Return on Equity (w
Slide 17: Top Ten Holdings as of 6/30/15
TOP TEN HOLDINGS AS OF 6/30/15 Company % of Fund Country British American Tobacco p.l.c. 6.07 United Kingdom Housing Development Finance Corp. Limited 5.44 India Roche Holding Ltd Genusssch. 4.54 Switzerland Unilever NV 4.44 Netherlands HDFC Bank Limited 4.33 India Nestle S.A. 4.10 Switzerland Recki
Slide 18: Sector Allocation as of 6/30/15
SECTOR ALLOCATION AS OF 6/30/15 36.3% 26.2% Virtus Foreign Opportunities Fund MSCI EAFE® Index 18.2% 17.9% 12.9% 13.2% 12.7% 10.9% 11.2% 7.4% 6.1% 4.7% 5.2% 4.9% 4.4% 3.6% 2.1% 2.1% 0.0% 0.0% Consumer Health Care Financials Consumer Information Industrials Energy Materials Telecom Utilities Staples
Slide 19: Country Allocation as of 6/30/15
COUNTRY ALLOCATION AS OF 6/30/15 Virtus Foreign Virtus Foreign Opportunities MSCI EAFE® Opportunities MSCI EAFE® Country Fund Index Difference Country Fund Index Difference United Kingdom 20.7 20.3 0.4% South Africa 1.7 0.0 1.7% Switzerland 15.8 9.2 6.6 Brazil 1.2 0.0 1.2 India 12.2 0.0 12.2 Ireland
Slide 20: Top Portfolio Positions
TOP PORTFOLIO POSITIONS We Believe Stock Price Follows Earnings Growth over the Long Term – Positions 1 and 2 British American Tobacco PLC Housing Development Finance Corp. 7/16/10 – 7/10/15 (Weekly) 7/16/10 – 7/10/15 (Weekly) 4 50 60 1500 55 1300 40 50Price 3 NTM EPS Pr NT 1100 45 30 40 900 EPS % E
Slide 21: Top Portfolio Positions
TOP PORTFOLIO POSITIONS We Believe Stock Price Follows Earnings Growth over the Long Term – Positions 3 and 4 Roche Holdings Genuss Unilever N.V. 7/16/10 – 7/10/15 (Weekly) 7/16/10 – 7/10/15 (Weekly) 20 300 2.0 45 19 280 40 18 260 Price NTM EPS P N 17 240 1.8 35 16 220 EPS % EPS % 15 200 30 EUR CHF
Slide 22: Top Portfolio Positions
TOP PORTFOLIO POSITIONS We Believe Stock Price Follows Earnings Growth over the Long Term – Positions 5 and 6 HDFC Bank Limited Nestle S.A. 7/16/10 – 7/10/15 (Weekly) 7/16/10 – 7/10/15 (Weekly) 65 1300 5.0 80 55 1100 4.5 70 Price NTM EPS P N 45 900 4.0 60 EPS % EPS % 35 700 3.5 CHF INR 50 25 500 3.0
Slide 23: Top Portfolio Positions
TOP PORTFOLIO POSITIONS We Believe Stock Price Follows Earnings Growth over the Long Term – Positions 7 and 8 Reckitt Benckiser Group PLC Philip Morris International Inc. 7/16/10 – 7/10/15 (Weekly) 7/16/10 – 7/10/15 (Weekly) 4 70 6 100 90 60 Price NTM EPS 80 Pr NT 3 50 5 70 60 EPS % EPS % USD 40 GBP
Slide 24: Top Portfolio Positions
TOP PORTFOLIO POSITIONS We Believe Stock Price Follows Earnings Growth over the Long Term – Positions 9 and 10 Novo Nordisk SABMiller PLC 7/16/10 – 7/10/15 (Weekly) 7/16/10 – 7/10/15 (Weekly) 16 450 3.0 50 400 14 2.5 350 Price 40 NTM EPS P N 12 300 2.0 10 30 250 EPS % EPS % DKR 1.5 GPB 8 200 20 150
Slide 25: Strong Performance Across Market Cycles
STRONG PERFORMANCE ACROSS MARKET CYCLES Sharpe Standard Upside Downside 3 YEAR as of 6/30/15 Alpha Beta Ratio Deviation (%) Capture (%) Capture (%) JVIAX at NAV -2.13 0.81 0.76 9.84 77.51 95.66 MSCI EAFE® 0.00 1.00 1.13 10.52 100.00 100.00 Morningstar Foreign Large 0.29 0.87 1.12 9.54 87.57 84.91 Gr
Slide 26: Performance Review as of 6/30/15
PERFORMANCE REVIEW AS OF 6/30/15 Since QTD YTD 1 Year 3 Year 5 Year 10 Year Inception** A Share at NAV 0.34 2.40 -2.98 7.32 9.17 6.43 7.05 A Share at POP* -5.43 -3.48 -8.56 5.22 7.89 5.80 6.79 I Share 0.39 2.53 -2.73 7.58 9.44 n/a 4.42 MSCI EAFE Index (Net) 0.62 5.52 -4.23 11.97 9.54 5.12 5.03 MORNI
Slide 27: Why Vontobel Asset Management?
WHY VONTOBEL ASSET MANAGEMENT? Favorable risk/return results – High alpha, low standard deviation, and low beta relative to peer group and benchmark Disciplined application of the same investment approach over several market cycles – Consistent approach complements other asset classes and styles
Slide 28: Virtus International Equities Capabilities
VIRTUS INTERNATIONAL EQUITIES CAPABILITIES Subadvised By Fund A Shares I Shares Vontobel Asset Virtus Emerging Markets Opportunities Fund HEMZX HIEMX Management Virtus Foreign Opportunities Fund JVIAX JVXIX Virtus Global Opportunities Fund NWWOX WWOIX Virtus Greater European Opportunities Fund VGEAX
Slide 29: Important Risk Considerations
IMPORTANT RISK CONSIDERATIONS Equity Securities he market price of equity securities may be adversely affected by financial market, industry, or issuer- T specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk. Foreign & Emerging Investing internatio
Slide 30: Definitions
DEFINITIONS CFO (Cash Flow From Operating Activities) – An accounting item indicating the money a company brings in from ongoing, regular business activities, such as manufacturing and selling goods or providing a service. Cash flow from operating activities does not include long-term capital or inv
Slide 31: Morningstar
MORNINGSTAR For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for a variation in a fund’s monthly performance (including the effects of sales charges, loads, and re- demption fees), placing
Slide 32: Virtus is a distinctive partnership of boutique investment managers
Virtus (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. We are not constrained by a single investment approach; rather, we provide access to independent, specialized investment philo